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Year-end Update on Commercial Banks' NPL

02.21.2001

As of month-end December 2000, loan quality of commercial banks improved as the NPL ratio dropped to 15.10 percent from 16.26 percent (amended figure) in November 2000. Modest loan growth of 2.5 percent and the simultaneous reduction in volume of NPLs by 4.8 percent improved the industry’s loan profile during the period. Net of IBL, the NPL ratio also improved to 16.93 percent from previous month’s 17.96 percent. 

All groups posted higher loan levels, contributing to the lowering of NPL ratios—at 16.51 percent from last month’s 17.80 percent for EKBs, at 17.58 percent from 18.92 percent for NEKBs and at 3.80 percent from 3.88 percent for FXBs.  

The increase in LLRs to P107.2 billion from last month’s P105.9 billion together with the decline in NPLs propped up the coverage ratio (LLRs divided by NPLs) to 43.6 percent from last month’s 41.0 percent.  

Increased restructuring (by P8.7 billion) and holdings of ROPOA net (by P7.6 billion) influenced to a large extent the scaling down of NPLs during the period. Gross restructured loans increased by 9.6 percent and shared up to 6.1 percent of TLP compared to last month’s 5.7 percent. Holdings of ROPOA (net) also went up by 6.3 percent to P 128.2 billion from last month’s P120.6 billion or 4.3 percent of total assets from 4.1 percent last month.   

Overall asset quality was likewise upgraded due to the 1.3 percent contraction in non-performing assets (NPL plus net ROPOA) even as total assets increased by 2.1 percent. This pushed down NPA ratio to 12.5 percent from 12.9 percent last month.  

Using another broad definition of loan quality, the ratio of NPL plus current restructured loans plus gross ROPOA to TLP plus ROPOA slightly improved to 25.0 percent from 25.3 percent last month. However, it was still significantly higher than last year’s 20.8 percent.  

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